U.S. and Chinese Regulators Plan Mutual Inspections of Audit Firms
Officials from the U.S. Public Company Accounting Oversight Board have met with Chinese officials to try to resolve the impasse over inspections of accounting firms in China that audit Chinese companies whose stocks trade on U.S. exchanges.
The PCAOB reported Monday that a two-day Sino-U.S. Symposium on Audit Oversight was held last month in Beijing. Officials from the PCAOB, the Securities and Exchange Commission, the China Securities Regulatory Commission and the Chinese Ministry of Finance were in attendance. They briefed each other on their countries’ inspection and audit oversight procedures and exchanged views on how to increase mutual cooperation on cross-border audit oversight.
“The regulators of both countries share common objectives in protecting investors’ rights and interests, raising the quality of accounting and auditing standards, and improving the transparency and disclosure of public companies,” said China Securities Regulatory Commission chairman Shang Fulin in a statement. “Therefore, the regulators of both countries should enhance cooperation on the basis of mutual trust and respect.”
PCAOB chairman James Doty was not at the meeting, but U.S. officials brought a letter from him calling for enhanced cooperation and constructive discussions between U.S. and Chinese officials. “The development of an effective cross-border oversight system is essential to market integrity and investor protection, and the PCAOB and CSRC share a common goal of promoting fair, open, and sound markets,” he wrote.
Doty has been pushing for inspections of Chinese firms that audit companies trading on U.S. exchanges, particularly those that did reverse mergers with U.S. shell companies as a way of getting listed in the U.S. markets.
PCAOB board member Lewis Ferguson was in attendance at the meeting in China. He noted that the PCAOB is willing to share its inspection approaches and practices with Chinese counterparts to build joint cross-border audit oversight. “In return, the U.S. delegation expects to learn more, through future exchanges, about the methodology and practices of accounting and audit oversight in China,” he added.
Over the course of the two-day meeting, officials from both countries gave detailed presentations on how their supervision and inspection processes work. Both sides plan to engage in continuing dialogue on the oversight of accounting firms that provide auditing services to public companies in both the U.S. and China, with the goal of enhancing mutual trust and reaching an agreement on cross-border audit oversight.
The two sides discussed a series of arrangements they would follow to build mutual understanding and cooperation in the near future. They plan to send staff members to each country to observe the inspection of accounting firms and learn more about each other’s inspection process and methodology.The U.S. delegation has also invited Chinese officials to send delegates to Washington, D.C., to further discuss topics of mutual concern.